On price markets the higher the demand, the higher the price. Celebrities' baby photographs are in high demand and so magazines are prepared to pay dearly for them, several millions of dollars according to Katharine Q. Seelye (*). Since a free print would surely meet with unprecedented demand, Tom Cruise and Katie Holmes should seriously consider posting their baby's picture on the Internet. Its price would go through the roof.

Faced with the classic argument "All that's rare is expensive. A cheap horse is rare. A cheap horse is therefore expensive." one normally asserts the first statement does not hold. But isn't this explanation a bit facile? This statement, "All that's rare is expensive", is after all true on price markets, the common sense default assumption. If Aristotle's model delivers a sophism rather than a syllogism, it is because the second premise, "A cheap horse is rare", implicitly references a value market. Linking the two premises together merely confuses two distinct meanings of the word "market".

I refuse to be drawn in debating whether any money obtained from selling Baby Suri's image should go into a trust in its name to avoid the accusation of data right abuse. Following last week's fillip inspired by Yochai Benkler's "The Wealth of Networks", I am today interested in pricing and how the same notion appears on both price and value markets.

The price market is the beloved child of all economists. On such a market, price becomes the ultimate measure of value, neatly aggregating all characteristics of the goods or services concerned, and computed so as to balance offer and demand. Stock markets and commodity markets provide us with real life examples. In a free and competitive environment, consumer goods or service companies should in theory strive to propose fixed priced offers whose prices approximate the so-called market price.

On value markets however far from measuring value, price is only one of the many characteristics of the offer. The global balance between offer and demand is replaced by singular transactions matching the interests of the participants whenever it can be done. Such participants may well boast of having found "a good deal", below "market price" if buying or above it if selling. But this is more illusion than reality as there is no longer a "market price". I recently suggested that job markets ought to act more like value markets than price markets. But the best case for value markets come from the study of how far real companies will go to avoid the single price principle in consumer goods and services:

set unbundled options at premium prices (hotels), as reported by Damon Darlin (**) from the work of David Laibson and Xavier Gabaix

Some economists will be quick to point out that it is possible to maintain the existence of a true market price by accounting for all these discrepancies. If the same product appears to carry two prices depending on the transaction, it is because there are two distinct offers involved, often in regard with consumer convenience, and the difference in their prices is the price of this difference. I hear them. As later Ptolemaic astronomers would have said, one more epicycle and the model will hold.

As they engage in this so-called "yield management", companies naturally attempt to maximize their own profits. For some readers this may be the main point. Rather than to rely on the number of factors influencing a transaction, they look at whether or not price is a factor. But does the absence of price mean an absence of interest? In describing what he calls "non markets", Yochai Benkler never hides that individuals have their own interests in mind, whether it is self-expression or self-promotion. Companies too self-promote themselves in promoting free goods or services, e.g. free air travel for sick children. Depending on the market considered, price may or not be a factor but the key question for me is whether it is the sole factor.

Let me stress that on value markets, participants engage in a transaction because their mutual interests have matched. While examples given so far talk about savvy companies and na´ve consumers, individuals are not the last to pursue their own goals diligently. Marketing messages would not insist so much on "offering good value" if it did not refer to some underlying reality.

A value market appears to be a better way to reach satisfactory deals. But it suffers from a severe drawback: since price no longer acts as an information aggregator, it is inherently difficult for market participants to find mutual matches. It is not unusual for such markets to stay out of balance and almost all are deeply asymmetric, putting individuals at a disadvantage. Take air travel as an example. The multiplicity of fares paid by the passengers sharing the same flight attests this is a value market. Yet many years after, i.e. a lifetime at Internet speed, companies are still struggling as to the best way to deal with their customers (2). Have you ever tried to find the best offer for yourself? If you have any flexibility on dates and airline company, I wish you luck. Comparative sites do not have all the fares, airline sites do not have all the flights and no site offers you more than a token attempt to account for your time flexibility. Trial and error remain the best available way.

In order to be efficient, a value market should have the following characteristics:

take the interest of both sides of the trade into account, a non trivial task when dealing with consumer markets (e.g. compare Consumer Reports to marketing literature)

be neutral, since one can hardly expect a market participant not to bias the system to its advantage (e.g. kites as expert on doves)

avoid accumulating profile and transaction data from the participants, if one does not want to create a Big Brother who will inevitably succumb to the combined pressure of advertisers, governments and lawyers

Notice that since ensuing transactions are the responsibility of the participants concerned by the match, there is no need for the value market to guarantee performance (3).

The success of eBay shows the need for such organizations. If one puts aside its historical reliance on auctions, eBay's matching engine is far from perfect though and falls quite short on the third criteria. Readers of my fillips will not be surprised if I insist on the full range of eprivacy rights:

between competing sellers (4)

between competing buyers

between corresponding buyers and sellers

and last but not least between buyers and sellers on the one hand and the market organizer on the other

Without the first three rights, no serious negotiations can be entered into by the participants
Without the last one, the market would quickly lose efficiency. Indeed what company would consent that a third party, no matter how neutral and benevolent, kept a history of its actual negotiating positions?

Needless to say I know of no such market today. Compared to price markets, actual value markets are far from being as efficient.

Scalping is a prime example of market value inefficiency. The topic has consumed whole boreal forests over the years (5) but the issue is quite simple. Seats in a stadium or a theater are limited by construction. On a price market, as run by scalpers at the last minute, "All that's rare is expensive". Backed by public opinion, event organizers however wish to run a value market, where an individual's level of interest, its length or its very newness, the individual's standing in its peer group could all be accounted for, besides the ability to pay the ticket price and the type of seat. As the event organizers are unable to implement their wish, the resulting mix predictably clashes with logic and ends up creating a semi-criminal class.

It does not have to be that way. ePrio has developed a solution for so-called domain makers to organize efficient value markets.

So will Tom Cruise seize the occasion and come out all guns firing for ePrio or will People magazine continue to scalp babies?

(3) Guarantee mechanisms can of course be offered as an optional service, possibly through a third party acting as an escrow agent

(4) in keeping with Wikipedia's definition we use the words buyers and sellers by extension. When money is not even involved, seller designates a person who first seeks to exchange and buyer a person who proposes to be a counterpart.